Electronic Arts Inc. Q4 FY 2020 Results - May 5, 2020 - AWS
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Electronic Arts Inc.
Q4 FY 2020 Results
May 5, 2020Safe Harbor Statement
Please review our risk factors on Form 10-Q filed with
the SEC.
• Some statements set forth in this document, including the information relating to EA’s fiscal year 2021 guidance and title slate, contain forward-looking statements that are
subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “plan,” “predict,” “seek,” “goal,” “will,” “may,” “likely,” “should,”
“could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not
guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed in the forward-looking
statements.
• Some of the factors which could cause the Company’s results to differ materially from its expectations include the following:
• The Impact of the COVID-19 Pandemic: Continued disruptions, postponements or cancellations of sports seasons and sporting events around which the Company seeks
to launch games and provide live services; worsening economic conditions that negatively impact discretionary consumer spending and consumer demand; the closure of
several of the Company’s key locations, including its global headquarters in Redwood City, California and key studios across North America, Europe and Asia which could
impact (1) the Company’s ability to meet product and live service development schedules, (2) the effectiveness of the Company’s quality controls and game testing
measures, and (3) the Company’s ability to conduct normal business operations; the inability of third-party developers with whom the Company has partnerships to meet
product development schedules; sustained closures of the physical stores of key retail partners and deterioration in the financial condition of such retail partners; delays in
the release date and the decreased unit volume of next-generation consoles from the Company’s platform partners; volatility in foreign currency exchange rates; and other
risks related to the COVID-19 pandemic that may be unforeseen as of the date of this release.
• General Business Risks: Sales of the Company’s products and services; the Company’s ability to develop and support digital products and services, including managing
online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the competition in the interactive
entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; the Company’s ability to realize the anticipated
benefits of acquisitions; the Company’s ability to predict consumer preferences among competing platforms; the Company’s ability to develop and implement new
technology changes in our tax rates or tax laws timely development and release of the Company’s products and services; and the consumer demand for, and the availability
of an adequate supply of console hardware units.
• In addition, other factors which could cause the Company’s results to differ materially from its expectations are described in Part II, Item 1A of Electronic Arts’ latest
Quarterly Report on Form 10-Q under the heading “Risk Factors”as well as in other documents we have filed with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the fiscal year ended March 31, 2019.
• These forward-looking statements are current as of May 5, 2020. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason,
except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.
• While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Annual Report on Form
10-K for the fiscal year ended March 31, 2020. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the
fiscal year ended March 31, 2020.
2EA Growth Trends
(in $ millions) Net Revenue1 Net Bookings2
5,537
5,150 4,950 5,180 4,944 5,211
4,845 4,942
4,396 4,566
1,223 Packaged
1,159 Packaged
1,700 1,240 1,642 1,222
1,971 1,908
1,987 2,035
4,314 Digital 4,052
3,450 3,710 3,538 3,722 Digital
2,874 2,531 3,034
2,409
FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20
ASC 605 ASC 606
Gross Profit1 Operating Cash Flow1
1,692 1,797
75.2% 75.3% 1,465 1,578 1,547
73.2% 73.3%
69.2%
FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20
ASC 605 ASC 606
1. Net revenue, gross profit and operating cash flow are presented on a GAAP basis.
2. Net bookings is an operating metric that EA defines as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net
revenue for online-enabled games and mobile platform fees. A calculation of net bookings can be found in the “Net Bookings” tab of the Financial Model provided on our IR website.
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements. 3EA Digital Net Bookings by Platform
PC & Other Console Mobile1
YOY
Quarterly YOY Trailing 12 Months Growth
Growth 9%
(in $ millions) 1,193 (in $ millions) 4,052
(6%)
1,117 3,722
1,048 3,538
290 913 13%
174 272 (6%) 806
697
698 768 2,623 12%
707 (8%) 2,182 2,340
176 135 138 2% 659 576 516 (10%)
Q4 FY18 Q4 FY19 Q4 FY20 Q4 FY18 Q4 FY19 Q4 FY20
1. Mobile digital net bookings only; excludes non-digital mobile items such as licensing revenue.
4EA Digital Net Bookings by Composition
Full Game Live Mobile1
Downloads Services
YOY Trailing 12 Months YOY
Quarterly Growth Growth
(in $ millions) (6%) (in $ millions) 4,052 9%
1,193
1,117 3,722
3,538 757 2%
1,048 213
190 (11%) 739
683
193
845 (7%) 2,779 15%
679 789 2,196 2,407
176 135 138 659 576 516 (10%)
2%
Q4 FY18 Q4 FY19 Q4 FY20 Q4 FY18 Q4 FY19 Q4 FY20
1. Mobile digital net bookings only; excludes non-digital mobile items such as licensing revenue.
5FY21 Announced Titles
Launch Title
Burnout Paradise Remastered
Q1 Command & Conquer Remastered
FIFA 21
Q2
Madden NFL 21
Q3 NHL 21
Q4
• Only publicly announced titles are represented above. Titles are reflected in alphabetical order and launch timing is subject to change.
• We expect to announce additional title releases in FY21 over the coming months, including an unannounced EA SPORTS title, an additional EA HD title, four
EA Partners titles and two mobile soft-launches.
• In addition to our unannounced FY21 releases, we will see platform expansions for our current EA titles, plus the release of our previously announced Medal
of Honor VR title in partnership with Oculus.
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements. 6Select Live Services and Mobile
Console/PC Mobile
Active Q4 FY20
7FY21 Guidance
The following table provides guidance for EA’s FY21 financial performance. These preliminary estimates and expectations are based on current
information as of May 5, 2020 and are subject to business and economic risks and uncertainties that could cause actual eventsor actual future results
to differ materially from expectations set forth herein. In addition, while EA does not provide expectations on non-GAAP financial performance
measures, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP
expectations to assess EA’s operating results and plan for future periods.
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended December 31,
2019.
Twelve Months Ending March 31, 2021
GAAP-Based Financial Data
Change in
deferred net
revenue
Acquisition- (online-
GAAP related enabled Stock-based
Guidance expenses games) compensation
(in $ millions)
Total net revenue 5,525 - 25 -
Cost of revenue 1,382 - - -
Operating expense 2,850 (20) - (430)
Income before provision for income taxes 1,270 20 25 430
Net income 978
Number of shares used in computation:
Diluted shares 292
Operating Cash Flow 1,575
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements. 8Q1 FY21 Guidance
The following table provides guidance for EA’s Q1 FY21 financial performance. These preliminary estimates and expectations are based on
current information as of May 5, 2020 and are subject to business and economic risks and uncertainties that could cause actual events or actual
future results to differ materially from expectations set forth herein. In addition, while EA does not provide expectationson non-GAAP financial
performance measures, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust
our GAAP expectations to assess EA’s operating results and plan for future periods.
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended December
31, 2019.
Three Months Ending June 30, 2020
GAAP-Based Financial Data
Change in
Acquisition- deferred net
GAAP related revenue (online- Stock-based
Guidance expenses enabled games) compensation
(in $ millions)
Total net revenue 1,220 - (220) -
Cost of revenue 210 - - -
Operating expense 635 (5) - (90)
Income before provision for income taxes 374 5 (220) 90
Net income 270
Number of shares used in computation:
Diluted shares 291
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements. 9Guidance – Phasing
FY21 Quarterly Net Revenue and Net Bookings
Q1E Q2E Q3E Q4E FY21E
GAAP Net Revenue % 22% 22% 31% 25% 100%
GAAP Net Revenue $M $1,220 $1,225 $1,710 $1,370 $5,525
Change in deferred net revenue $M ($220) $175 $240 ($170) $25
Net Bookings % 18% 25% 35% 22% 100%
Note: Starting in FY21, we will report our mobile bookings gross of platform fees, instead of net, to align with industry practice. This will result in a gross up in net bookings but no change to
underlying profit. Please refer to our IR website for additional details.
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements. 10Currency Assumptions
• Current FX assumptions1:
USD/ FY19 FY20 FY21
Q4A Q4A
Net EUR 1.14 1.10 1.08
Bookings GBP 1.29 1.30 1.29
Operating CAD 1.34 1.32 1.32
Expenses SEK 9.15 9.59 9.81
• Rule of thumb
• If the U.S. dollar strengthens 10% against the Euro and British pound sterling:
• With hedging, total net bookings decrease 2.1%
• Total cost of revenue and operating expenses decrease 1.6%
• If the U.S. dollar strengthens 10% against the Canadian dollar and Swedish krona:
• Total net bookings decrease 0.4%
• With hedging, total cost of revenue and operating expenses decrease 0.7%
Note: Our financial guidance includes the forecasted impact of the FX cash flow hedging program.
1 For FY19 Q4A and FY20 Q4A, FX rates are a simple average of EA’s actual monthly P&L rates. For FY21, the same FX rates are used for all forecast
periods.
These forward-looking statements are valid as of May 5, 2020 only. Electronic Arts assumes no obligation to update these forward-looking statements.
11Cash Flow Selected Data
Actuals
(in $ millions) Q4 2020 Q4 2019 Q4 TTM 2020 Q4 TTM 2019
Cash Flow Data
Investing Cash Flow (11) 500 (1,357) 169
Financing Cash Flow (300) (282) (1,358) (1,253)
Operating Cash Flow A 498 599 1,797 1,547
Capital Expenditures B 40 35 140 119
Free Cash Flow A-B 458 564 1,657 1,428
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